It has come to the attention of the National Committee on Planned Giving (NCPG) that one or more charitable foundations have been recruiting life insurance agents and others to sell charitable gift annuities on commission.

1. It may subject a gift annuity reserve fund to regulation by the Securities and Exchange Commission (SEC). The Philanthropy Protection Act of 1995 exempted gift annuity and charitable remainder trust funds from securities laws provided that no commissions were paid to solicitors of these gifts.

2. It may cause state insurance departments to impose the same licensing requirements on charities that issue annuities as they impose on insurance companies that sell commercial annuities. This could make it prohibitively expensive for charities to operate a gift annuity program.

3. It subverts current efforts by the charitable community to exempt gift annuities from the state regulations applicable to domestic insurers. Gift annuities are different from commercial annuities because they are a means of making a charitable gift and are solicited by staff and volunteers of a charity. However, when gift annuities are sold by commissioned agents, they will appear to insurance commissioners to be very much like commercial annuities.

4. It may affect donors’ tax benefits if the contribution is construed to be reduced by the amount of the commission.

5. It would create confusion and uncertainty as to proper crediting of gift amounts on gift receipts issued by charities for charitable gift annuities, under the substantiation requirements of Code Sec. 170(f)(8).

6. It may violate state solicitation laws and cause a loss of tax exempt status.

7. It will significantly reduce the residuum that will be available for charitable purposes.

8. It violates the Model Standards of Practice for the Charitable Gift Planner which state that payment of “finders fees, commissions and other fees by a donee organization…as a condition for the delivery of a gift are never appropriate.”

Accordingly, NCPG urges all organizations engaged in this practice to cease immediately. NCPG urges all charities to refuse to participate in this practice. NCPG encourages its council members to explain the inherent problems to any charity or donor advisor considering commissioned sales of gift annuities. (Note: The American Council on Gift Annuities has passed a similarly-worded resolution).

Selling Charitable Gift Annuities on Commission 
(Reaffirmation of position - 2001)

In response to concerns expressed by many gift planners about commission sales of charitable gift annuities, the National Committee on Planned Giving (NCPG) and the American Council on Gift Annuities (ACGA) wish to reiterate their long standing opposition to this practice. NCPG and ACGA jointly reaffirm the purpose of charitable gift annuities as a method of making a gift to charity, and they continue to oppose the commission sales of charitable gift annuities for the following reasons:

• The payment of commissions on the sale of a charitable gift annuity may subject a gift annuity reserve fund to regulation by the Securities and Exchange Commission (SEC). The Philanthropy Protection Act of 1995 exempted charitable gift annuity funds from regulation as securities provided that no commissions are paid to solicitors of these gifts.
• Charitable gift annuities are different from commercial annuities because they are a means of making a charitable gift. If gift annuities are sold by commissioned agents they may appear to be much like commercial annuities.
• The payment of commissions on the sale of charitable gift annuities creates confusion and uncertainty as to proper crediting of gift amounts on gift receipts issued by charities for charitable gift annuities under the substantiation requirements of IRC Sec. 170(f)(8).
• The commission sale of charitable gift annuities may violate state solicitation laws and cause a loss of tax exempt status.
• The payment of a commission on the sale of a charitable gift annuity may significantly reduce the residuum that will be available for charitable purposes.
• These practices violate the Model Standards of Practice for the Charitable Gift Planner which state that payment of “finders fees, commissions and other fees by a donee organization... as a condition for the delivery of a gift are never appropriate.”

Accordingly, NCPG and ACGA jointly urge all organizations engaged in this practice to cease immediately and further urge all charities to refuse to participate in these practices.

Finally, the National Committee on Planned Giving and the American Council on Gift Annuities urge all charities that issue charitable gift annuities to (1) comply fully with applicable federal and state regulations, and (2) maintain adequate financial reserves, responsibly managed, to assure payments to all annuitants for the duration of their contracts.